Patent ruling re-opens door to do business in the US

A recent ruling in the US Supreme Court has made it possible once again for software manufacturers and other producers of computer-based business systems to seek patent protection in the US

A recent ruling in the US Supreme Court has made it possible once again for software manufacturers and other producers of computer-based business systems to seek patent protection in the US. By taking advantage of this opportunity, UK companies could secure a firm commercial foothold in the world's biggest consumer marketplace, writes Nick Wallin, patent attorney at Withers & Rogers.

The opportunity has arisen as a result of the US Supreme Court's recent decision (28 June 2010) in a case involving Bernard Bilski, who filed a patent application in 1997 for a method used to hedge risk in the financial industry. The invention was a "pure" business method, in that it did not rely on computer implementation, but recited administrative steps that could be performed with pen and paper. The application was rejected by the USPTO in 1998 and after a series of appeals in the US courts, the case was finally heard by the Supreme Court at the end of 2009

Giving its verdict on the case, the US Supreme Court referred to previous rulings and while little reasoning was provided about how the decision was reached on the facts of the case, the court concluded that Bilski's method was too abstract to patent. While this was bad news for Bilski, crucially the court disagreed with a test of patentability known as the "machine or transformation" test, which had been applied earlier by the influential Court of Appeal for the Federal Circuit on hearing Bilski's case. The Supreme Court stated that this should not be used as the definitive test in every case and concluded that in some instances even pure business methods may be eligible for patenting.

Some spectators might say, "So what? This is what the law used to be in the US." and they are right. But the decision is important because it negates the Federal Circuit's insistence that when seeking patent protection in the US, inventions must be shown to relate to a machine or have some transformational effect on matter. In doing so, the ruling has re-opened the door many for computer-based process inventions (whether technical or business related) to gain valid patent protection in the US.

Of course, UK software manufacturers are used to setbacks when it comes to seeking patent protection in their domestic market, due to the stringent tests of patentability applied by the UKIPO in this area as part of their interpretation of European patent law. Such companies could therefore be forgiven for not leaping on this opportunity to pursue patent protection for their work in the US. But they could be missing out.

While other IP rights such as copyright and trade secrets often arise automatically, patent protection provides the unique benefits of a monopoly right to use an invention at the same time as, providing a well-defined and described business asset which could form the basis of a corporate deal or other business agreement. The nature of patents in providing a detailed description and definition of an invention helps bring clarity to what in fact a company brings to the table. This is often particularly helpful if there are plans to do business in the US through mergers or acquisitions, or by forming partnerships or joint ventures, where patent protection acts as a kind of protective umbrella, providing commercial cover to allow companies to develop these opportunities.

This opportunity to gain patent protection in the US is not restricted to software companies of course. There are many companies, across all sectors of industry that are currently involved in developing systems implemented using a computer. Such work may now be patentable in the US and for companies with business dealings there, this could give them a strong commercial advantage.

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